CFPB Proposes Changes to Reporting Requirements

The Consumer Financial Protection Bureau (CFPB) is proposing a rule designed to improve access to credit. The proposed rule would update the reporting requirements contained within the Home Mortgage Disclosure Act (HMDA) and simplify the reporting process for financial institutions.

The HDMA requires lenders to report information on home loans that they originate or purchase. Regulators use the information to determine whether the lenders are meeting the needs of the community and to possibly identify discriminatory lending practices.

“It is critical that we shed more light on the mortgage market – the largest consumer financial market in the world,” said CFPB Director Richard Cordray. “The Home Mortgage Disclosure Act helps financial regulators and public officials keep a watchful eye on emerging trends and problem areas in the mortgage market. Today’s proposal would help us understand better how to protect consumers’ access to mortgage credit while simplifying the reporting requirements for financial institutions.”

The CFPB was charged with revisiting the HDMA as part of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. Specifically, the bureau was directed to expand the reporting criteria to include data points that contributed to the financial crisis.

There are two main areas of focus:

First, the bureau is proposing that lenders be required to report information that could identify discriminatory lending patterns on the part of the financial institution. The new information would include, at the very least, the property value, the term of the loan, and the borrower’s age and credit score.

The second area that the bureau wants more information on is access to credit in the market. They want data that would allow them to better understand how the ability-to-pay requirements is affecting the marketplace. It would be accomplished by providing more information on underwriting and pricing such as debt-to-income ratio, the interest rate of the loan, and the total discount points charged for the loan.

The proposal also calls for the simplification of the reporting process for financial institutions. It purports to standardize the reporting threshold for most lenders, relax the reporting requirements for some smaller lenders, and improve the electronic reporting process.

The proposed rule will be open for public comment through October 22, 2014.

Derek Templeton is an attorney based in Dallas, Texas. He practices in the areas of real estate, financial services, and general corporate transactional law. His experience includes time as an Attorney Adviser for the U.S. Small Business Administration and as General Counsel for a nonprofit organization in Dallas. A self-avowed "policy junkie," he has a keen interest in the effect that evolving federal policy has on the mortgage, default servicing, and greater housing industries.